Materials price inflation and a labor shortage have been hampering growth in the U.S. shale oil industry, and now it has also slipped into a fracking equipment shortage.
Reuters reported this week that demand for fracking equipment currently exceeds supply, which means one more obstacle to boosting production in line with demand projections.
The report cited the chief executive of NexTier Oilfield Solutions, a fracking company, as saying, "Availability of frac fleets is one of main bottlenecks impeding oil and natural as production growth for the next 18 months."
This adds to previously identified shortages of things like frac sand and steel piping used for oil wells, and it could last for several years, according to NexTier Oilfield Solutions' Robert Drummond.
Supply chains are still damaged from the pandemic disruptions, and companies are still being cautious with their capital allocations, he noted as reasons for the outlook. Indeed, Halliburton warned earlier this month that "supply chain bottlenecks, even for diesel fleets, make it almost impossible to add incremental capacity this year."
What all this means is the growth in U.S. crude oil production would be constrained despite calls from the federal government for a fast ramp-up in output.
According to the latest data from the U.S. Energy Information Administration, production averaged 12.1 million barrels daily during the week to July 22. That was up from 11.9 million bpd a week earlier and 11.2 million bpd a year earlier. It was still lower than the record 12.3 million bpd oil companies in the U.S. produced in 2019.
The Energy Information Administration expects the average daily production for this year to be around 11.9 million bpd. This means that production will not be growing much from current levels, not least because, per Halliburton and Liberty Oilfield Services, the equipment market was nearing full utilization.
By Irina Slav for Oilprice.com
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